Ups and downsThe Aussie dollar has been bobbing like a cork on the ocean in recent times, as the jawboners from industry and government try to talk it down for the good of exports, while market traders look for opportunities in the turbulence as the emerging markets story unravels.

The Reserve Bank of Australia’s recent decision to keep record low interest rates of 2.5 per cent on hold actually spiced up the currency a little, pushing it back above $US89¢ from lows just over $US86¢ inmid-January.

But looking over a longer time frame, the Aussie has been on a downward trend. But as this week’s chart, produced by Philip D’Souza, a director of the Australian Technical Analysts Association shows, the currency now appears to be on the cusp of an upward trend.

Last time we looked at the Aussie back in early October we applied Elliott Wave theory to the chart and the currency performed almost exactly as that analysis suggested. Then we had the currency coming off lows of $US88.49¢ and heading northwards on what we identified as the fourth upward leg of a five-leg Elliott Wave formation.

That fourth leg peaked out at $US97.58¢ on October 25 using a weekly chart. The downward wave five then kicked in pushing the currency down to $US86.60¢ on January 24 (using a weekly chart). There are two phenomena on the chart suggesting that bottom could mark the end of the downward fifth and final wave of the formation.

Firstly the decline from point 4 on the chart to point 5 represents an almost exact 127.2 per cent retracement of the gain made when the currency climbed from point 3 to point 4.

This is a significant Fibonacci number retracement level where most bullish or bearish trends tend to end.

To that is added a Fibonacci time count, the 13 weeks the market took to get from point 4 to point 5. That 13-week interval is seen as an indication of a possible counter trend rally, especially in this case where Fibonacci series on both price and time count coincide.

So watch the weekly chart of the Aussie. If its weekly price chart closes over $US88.49¢ and then $US90.86¢, the Elliott Wave pattern will be said to have completed and a counter rally may take hold. Green lines on the chart show resistance points to expect in such a rally.